Ocean Shipping Law Embraces Sweeping Reform

Ocean Shipping Law Embraces Sweeping Reform

June 20, 2022
Jurisdiction of the Federal Maritime Commission is expanded.

President Biden signed into law the Ocean Shipping Reform Act (OSRA), which is intended to broaden the regulatory oversight of the Federal Maritime Commission (FMC) over ocean ship lines and increase competition in the industry.

“During the pandemic, ocean carriers increased their prices by as much as 1,000%,” Biden said at the June 16 signing ceremony. “And, too often, these ocean carriers are refusing to take American exports back to Asia, leaving with empty containers instead. That’s costing farmers and ranchers – and our economy – a lot of money.”

The legislation gives the FMC greater authority to regulate certain ocean carrier practices while helping to promote the growth and development of exports from the United States “through a maritime system that is transparent, efficient and fair,” the president claimed.

The National Industrial Transportation League, a shippers advocacy group and one of the bill’s biggest boosters, said the FMC now “will have better tools at its disposal to address global ocean carriers’ operating practices which have contributed to high inflation and supply chain disruptions experienced by NITL members and their customers.”

One of those members is Lori Fellmer, Vice President, logistics and carrier management at BassTech International and chair of NITL’s Ocean Transportation Committee. “Our members, like all U.S. businesses for which the ocean transportation network is fundamental, continue to suffer under a system plagued by deteriorating service levels and unreasonable fees and charges,” she said. Fellmer added that OSRA will further empower the FMC to address these concerns, which “will greatly benefit U.S. exporters and importers.”

American Trucking Associations also hailed the measure, which it hopes will address ocean carriers’ container demurrage practices that truckers have had to contend with for many years. It is ATA’s contention that these fees have been administered unfairly by the ocean lines and have imposed unreasonable costs on truckers.

“This day has been a long time coming,” declared ATA President Chris Spear. “This bill provides important tools to address unjustified and illegal fees collected from American truckers by the ocean shipping cartel – fees that have contributed to the shipping lines raking in $150 billion in profits just last year.”

Jonathan Eisen, director of the ATA Intermodal Motor Carrier Conference, observed, “This is the first significant change to ocean shipping regulations in more than two decades – a period of time when the industry has been shaped into a cartel of 10 foreign-owned companies who have exercised a tremendous amount of power over American truckers and consumers. Thanks to this bipartisan legislation, those carriers will no longer be able to charge truckers exorbitant and illegal detention and demurrage fees, increasing efficiency and reducing costs across the supply chain.”

What it Does

Among its many provisions, the new shipping act aims to:

 Prohibit ocean carriers from unreasonably refusing cargo space accommodations for U.S. exports and from discriminating against U.S. exporters.

  • Promote transparency by requiring ocean common carriers to report to the FMC each calendar quarter on total import/export tonnage and twenty-foot equivalent (TEU) units (loaded/empty) for every vessel that makes port in the U.S.
  • Authorize the FMC to self-initiate investigations of ocean common carriers’ business practices and apply enforcement measures.
  • Establish new authority for the FMC to register shipping exchanges to improve the negotiation of service contracts.
  • Direct the FMC to initiate new rulemakings regarding prohibited practices involving the assessment of detention and demurrage charges.
  • Add provisions for charge complaints, allowing them to be submitted directly to the FMC regarding charges assessed by a common carrier.
  • Expand prohibited carrier activities to include unreasonable refusal of otherwise available cargo space, improperly assessed charges, and inaccurate/incomplete detention and demurrage invoicing.

The World Shipping Council (WSC), which represents the ocean liner companies, took issue with the heated rhetoric coming from Biden and several of the industry’s other critics. “Recent weeks have seen several attempts to demonize ocean carriers by deploying ‘us versus them' rhetoric. That is not only inaccurate but dangerous, as it undermines the ability to understand and work towards solving the root causes of America’s supply chain problems,” it said.

“Ocean carriers are the longest link in the global supply chain that delivers vital supplies to American business, government and consumers. The supply chain is not foreign; it is global.”

The council also pointed to an earlier FMC investigation that found the industry is actually quite competitive at present, with 13 more ocean liner companies added so far this year that are currently responsible for more than 30% of the sailings from Asia to the U.S.

“There is no dispute that carriers, after two decades of low or no margins and cheap and abundant capacity for shippers, are actually making profits. These profits are invested in building capacity for the future on land and sea,” WSC asserted.

It also pointed out that in 2021, carriers ordered a record-breaking 561 new ocean-going vessels worth $43.4 billion, and 208 vessels worth $18.4 billion have been ordered year-to-date in 2022.

The council was blunt about where it believes the bulk of the supply chain failures occur – in this country “As long as America’s ports, railyards and warehouses remain overloaded and unable to cope with the increased trade levels, vessels will remain stuck outside ports to the detriment of importers as well as exporters. Ocean carriers continue to move record volumes of cargo for our country and have invested heavily in new capacity – America needs to make the same commitment and invest in its landside logistics infrastructure.”

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